OPEC+ agrees to boost oil output when Strait of Hormuz reopens

MOSCOW/LONDON: OPEC+ agreed on Sunday (Apr 5) to raise its oil output quotas by 206,000 barrels per day for May, a modest rise that will largely exist on paper as key members are unable to increase production due to the US-Israeli war with Iran.

The war has effectively shut the Strait of Hormuz, the world’s most important oil route, since the end of February, cutting exports from OPEC+ members Saudi Arabia, the UAE, Kuwait and Iraq. Crude prices have surged to a four-year high close to US$120 a barrel, pushing up transport fuel costs and pressuring consumers and businesses globally.

The quota increase represents less than 2 per cent of the supply disrupted by the Hormuz closure, but signals readiness to raise output once the waterway reopens. Consultancy Energy Aspects called the increase “academic” as long as disruptions persist.

“When the Strait of Hormuz is closed, additional barrels from OPEC+ become largely irrelevant,” said Jorge Leon, a former OPEC official and head of geopolitical analysis at Rystad Energy.

ATTACKS ON ENERGY ASSETS A CONCERN

Eight members of OPEC+ agreed to the May quota increase at a virtual meeting on Sunday. A separate panel, the Joint Ministerial Monitoring Committee, expressed concern about attacks on energy assets, saying they were expensive and time-consuming to repair and therefore had a significant impact on supply.

Besides Gulf disruptions, other members such as Russia are unable to increase output due to Western sanctions and infrastructure damage from the war in Ukraine. Gulf officials have said it could take months to resume normal operations even if the war stopped and Hormuz reopened immediately.